21/1/08

The Dow fell 59.9 points to end at 12,099.3, the S&P 500 dropped 8.02 points to finish at 1,325.2. The Nasdaq slipped 6.88 points to close at 2,340.02.

General Electric rose 3.3% to close at $34.31 following strong results. The diversified manufacturer reported higher quarterly earnings that met estimates following higher revenue that beat estimates. GE also stated that 2008 results would hit forecasts. . 

Late Thursday IBM reported higher quarterly sales and earnings that beat analysts expectations. The company also issued a 2008 earnings guidance that outstripped analysts current estimates. Shares closed 2.3% higher at $103.40.

Rocking the financial sector was bond insurer Ambac. On Friday the company lost its triple-A credit rating from Fitch, putting at risk billions of dollars of corporate and municipal bonds covered by the company. Ambac had already plummeted more than 50% on Thursday after saying its credit rating was under review, and edged just 0.64% lower to $6.20 on Friday. Rival MBIA lost 7.3% to close at $8.55.

The Nasdaq suffered the least of the three major indices with semiconductors lending support. Programmable chip maker Xilinx gained 12.5% to $21.53 following higher than expected profit. Advanced Micro Devices climbed 11.5% to $7.07 after reporting a narrower than expected loss.

US light crude oil for February delivery rose $0.44 to settle at $90.57 a barrel. COMEX gold for February delivery added $1.20 to settle at $881.70 an ounce.

Treasury prices were almost unchanged, leaving the yield on the 10 year note at 3.65%.

The Nikkei sank 535.4 points to close at 13,325.9 this morning. Mitsubishi UFJ Financial Group Inc led banks lower after Japan's Finance Ministry cut its evaluation of five of eleven regional economies as housing investment fell and employment worsened. Toyota Motor Corp and Honda Motor Co fell as President George W Bush's economic plan failed to ease speculation of a recession in the US.

The Hang Seng is currently 1,387.6 points lower at 23,814.3. Mainland Chinese banks fell on concern they will have to write down the full value of their subprime related investments. Bank of China Ltd slumped after BNP Paribas SA said the bank may make provisions of $4.8 billion for its overseas securities. Air China Ltd declined the most on record after China Eastern Airlines Corp snubbed a bid to buy a stake.

The London market closed below the 6,000 barrier for the third session in a row on Friday as heightened volatility kept stocks in negative territory. Uncertainty over the US and UK economies saw the FTSE 100 swing dramatically between gains and losses as nervous investors reacted to Wall Street. The Footsie closed down 0.7 points at 5901.7, but had surged by more than 2% at one stage on early hopes of a better session for the DJ Industrials.

London's leading share index had been buoyed in mid-session trading by speculation that mining giant BHP Billiton may sweeten its proposal for Rio Tinto. The talk sent shares in the sector soaring, with Rio enjoying a gain of 221p to 4700p, or 5%. Xstrata also benefited, up 266p at 3363p amid the sector rally.

London Stock Exchange joined the mining pair near the top of the risers board, with shares up 63p to 1650p amid news that the LSE had opened an office in Beijing.

Retailers also made strong gains, helped by market whispers of stake building in Marks & Spencer. M&S added 15.25p to 414.5p, although BHS boss Sir Philip Green was quick to rubbish talk he was involved in the buying spree. Analysts said there was an element of relief that Christmas was not a total wash-out, despite official figures showing worse-than-expected volumes in December. The Office for National Statistics revealed that retail sales dropped by 0.4% in December, far worse than the 0.3% increase forecast by analysts in the City. But the news failed to halt a shares lift across the sector, with Kingfisher up 5.4p at 129.9p and Home Retail Group ahead 13p at 279.25p.

Mobile phone and broadband firm Carphone Warehouse suffered jitters, even though it told investors that it remained on course to meet market expectations. Shares ended down 2.75p at 302p. Elsewhere, British Energy shares recovered from a weak start to stand 11.5p higher at 531.5p. It said that two of its power stations would remain shut until the second half of 2008, but the guidance was taken as a positive sign that the company has a robust plan in place to resolve the problems.

Oil was up nearly 2% from mid-November to mid-December. The question is will manufacturers be able to pass this on in higher output prices, or will it have to be absorbed via reduced margins? So the focus will be on core output prices. Analysts think global trade is weakening so there will be only limited pass through into core goods prices. The inflation outlook is extremely important because it will determine how quickly and aggressively the BoE can cut rates to shore up growth.

UK DCLG House Prices (Nov) 0930 GMT

The DCLG House Price Index is the last of the house price indices to be released for November. This house price indicator is likely to remain more upbeat than the Nationwide and Halifax because it is a value-weighted index, and so places more weight on the London property market, which is outperforming (just) the rest of the UK. Analysts look for house prices to be unchanged on the month and the annual rate easing to 10.5%.

Manufacturing inventories rose 0.8 percent in November. Total business inventories are expected to have risen 0.5 percent, assuming 0.4 percent increases for both wholesale and retail stocks.

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